Posted on Wed Nov 2 2005 by Alex Aguilar
 
BEN IS IN! Big Ben Bernanke (pronounced Ber-NANK-kee) got the nod last week to take the reins in 2006 from retiring Fed Chairman Alan Greenspan. The new man in the Chair has superb credentials, but is known for being more “dovish” than “hawkish” in the fight against inflation. Right or wrong, the perception among Traders that Bernanke might not fight as hard to curb inflation brought Bonds under selling pressure, as inflation is the main enemy of fixed return assets such as Bonds. Over the course of the week, home loan rates rose accordingly by about .125 across the board.
More good news for the housing sector, as Existing Home Sales numbers for September were strong at 7.28 million sales... better than expectations and the second highest rate ever. The closely watched existing home inventory level was reported unchanged from last month at 4.7 months. This inventory level remains near record lows and suggests continued strength in the Housing market.
DID YOU KNOW... THAT MR. BERNANKE REGULARLY EATS IN THE CENTRAL BANK CAFETERIA, MAKING HIMSELF AVAILABLE TO STAFFERS AND COLLEAGUES TO DISCUSS HIS VIEWS? DID YOU KNOW... THAT HE BEGAN COLLECTING ACADEMIC HONORS EARLY, WINNING THE SOUTH CAROLINA STATE SPELLING BEE IN 1965, BUT WAS ELIMINATED AT NATIONALS BY MISSPELLING “EDELWEISS”? FOR MORE ON OUR NEXT FED CHAIRMAN, DON’T MISS THIS WEEK’S MORTGAGE MARKET VIEW.
Forecast For The Week
The economic calendar is loaded with potential market movers this week, including the Fed Meeting and Policy Statement on Tuesday afternoon. Another .25% hike to the Fed Funds Rate is a lock, but as always, the markets will dissect every word uttered by Mr. Greenspan... especially during his final months in office. Inflation has been on the rise, and on the heels of Bernanke’s appointment, Traders will be listening extra carefully for any clues or hints as to what the Fed is thinking.
This week also brings another Jobs Report, which can impact the trend of home loan rates for days and sometimes weeks following the release. Now remember that good economic news tends to be bad for Bonds and home loan rates. This means that if the upcoming Jobs Report shows better than expected new job growth – or a significantly lower than expected loss of jobs due to the hurricanes – Bond pricing and home loan rates could easily continue on their present path and worsen a bit further.
On the other hand, a weak Jobs Report would help Bond pricing and home loan rates to improve... but because Bonds have been in such a powerful downward trend of late, it would take a real stinker to see much improvement.
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